From the Magazine

Why Buyers Shunned the World’s Largest Diamond

At 1,109 carats, big as a tennis ball, the world’s largest uncut diamond was expected to shatter records at a June Sotheby’s auction. How did the dazzling stone go unsold? An exclusive reveals what went wrong.

BUT IS IT ART?
The 1,109-carat Lesedi La Rona diamond, on view at Sotheby’s in New York in May.

By Justin Lane/EPA/Redux.

The assassination of William Lamb began at 6:45 P.M. on a soft June
night. Spectators packed the killing ground, a sales room on the second
floor of Sotheby’s, in London. The victim wore the raiment of his caste,
a crisp tuxedo. A few yards in front of where he sat, blazing in its
spotlight on a plinth beside the auctioneer, was a 1,109-carat top-color
white diamond called Lesedi La Rona, the vessel of Lamb’s hopes for a
bold new way to sell rough diamonds. His wife had bought him new shoes
for the occasion, the toe caps spattered with faux gems. He wore socks
patterned with jaunty slashes of color.

The Lesedi diamond opened at $50 million and struggled from the start.
Fifty-one million dollars, someone offered, and too long after that,
$52 million. This was not the scenario that Lamb had imagined in his
dreams. In that version, a forest of bidding paddles would have shot up
in the room as eager buyers drove the price north of $100 million. Just
the month before, Lucara Diamond Corp., the company Lamb runs and the
owner of the diamond, had sold an 813-carat stone for $63.1
million—the highest price ever paid for a rough diamond. Now here was
this even greater jewel, the second-biggest diamond ever found, and
where were the clamoring suitors? Just that morning at breakfast, Lamb’s
boss, Lukas Lundin, a Swedish oil and mining tycoon whose family is
Lucara’s largest shareholder, had explained to me that the company’s
commission arrangement with Sotheby’s meant the stone would have to
reach $150 million for the auctioneer to make decent money. “Up to
$100 million,” he said, “they make almost nothing.”

“You have a buyer already, don’t you?” I said.

“We think we do,” Lundin replied, slicing into a poached egg. He
glanced out the window at the trees of Green Park and at the traffic on
Piccadilly flowing by in the rain. “But,” he raised his knife in a
cautionary gesture, “you never know.”

Nine hours later he sure found out, sitting in front of Lamb while the
auctioneer tried to drag up the price in increments of $500,000. At
$61 million, still short of the reserve, the price would not budge. The
gavel came down and brought the failed auction to a close.

Ashen-faced, Lamb got to his feet. A pack of diamond dealers closed
around him. I thought of Julius Caesar at the Senate on the Ides of
March. Those surrounding Lamb represented the old diamond order, whose
grip Lamb had just tried to loosen. By selling the great diamond at
auction, Lamb had attempted to replace the story some of these men tell
the world with another story, and the daggers bristling from his back
had been planted there by those who did not like the switch.

A Light Within

With the failure of the Sotheby’s auction, William Lamb released me from
the terms of a non-disclosure agreement with a ruinous breach penalty.
By signing it, I had gained exclusive access over a period of six months
not only to Lesedi La Rona but to the deliberations of the
owners—their doubts, their anxieties, their hopes—and to the story
of discovery that had set the attempted sale in motion. Within hours of
signing the agreement, earlier this year, I was over the ocean and
halfway to Botswana to see the diamond for myself. It was, I knew, an
apple-size, top-color white, by far the largest in a phenomenal run of
super-large diamonds that had lately come on the market: 550 carats, 404
carats, 813 carats, and on and on. This one left the others in the dust:
1,109 carats. How miners now manage to recover such enormous gemstones
without smashing them to bits in the mill is itself an astonishing feat
of engineering, for which much of the credit belongs to Lamb and his
close circle. Yet despite its spectacular success in doing just that,
and now possessing a stone that the greatest diamantaires in the world
were panting to examine, Lucara had shut the diamond away under tight
security. The company would not show it until it had the answer to a
question: was there a way to extract more money from this diamond than
the usual selling practice would deliver?

In the prevailing model, miners who find large rough sell it to people
who cut and polish it—the high-end trade. The high-end trade converts
the rough into a polished gem, slaps on as much margin as it will bear,
and sells it to the end-use billionaire. If Lucara wanted to get more
money for its diamond, then, one place to look for it was in that
margin. By selling straight to an end buyer, Lucara could have all the
proceeds for itself. Such a course would launch Lamb straight at
powerful vested interests.

In the plane’s darkened cabin, I scrolled through photographs of the
diamond. The Lesedi shone with a bright intensity. Large diamonds
radiate luminescence, as if a source of light lay deep inside their
complex structures. In the photograph I studied longest, a deep-blue
bruise seemed to smolder in the depths. In diamonds, carbon atoms are
laced together by the strongest bond in chemistry, the shared-electron
bond. In the places where diamonds form, titanic forces can wrench the
crystal lattice out of shape. When the heat created by a polishing wheel
reaches such a flaw, the diamond can explode. Lucara had announced that
the gem was a D, the best white color, and a type IIa, the purest form
of diamond. About its clarity, its structural condition, Lucara had said
nothing. The diamond was in Gaborone, the capital of Botswana. Hundreds
of top diamond dealers pass through Gaborone every month, but none had
yet seen the diamond.

At dawn we crossed the Angolan coast. A river glinted in the early
light. Angola’s waterways have produced ravishing diamonds. I remembered
a 24-carat pink recovered by a pair of South Africans I’d met. They
operated a suction barge on the Chicapa River during the Angolan civil
war, mining alluvial diamonds by day and exchanging rocket fire with
their competitors by night. They flew the pink to Johannesburg in a
Learjet, and sold it on the bourse for $4.8 million. By the time it
passed through a few more hands and got polished in New York, the price
had climbed to $20 million.

Diamond pricing is an arcane, rapacious art. Color is just one of the
many factors that bear upon it. Obviously, weight is a driver, too. The
per-carat price of diamonds rises exponentially with size. That is
because large diamonds are rarer than small diamonds. In New York right
now, a top-color, best-cut white weighing a single carat runs about
$30,000. Compare that to the price of a 100-carat stone of the same
quality that sold at Sotheby’s in New York last year for $22
million—$220,000 per carat. But a diamond weighing more than a
thousand carats? The stock market flailed around for a value in the days
after the discovery was announced, at one point driving up Lucara’s
market valuation by $150 million. Clearly there was no easy way to fix
a price, but everyone knew it would be a lot.

In Gaborone a driver picked me up at my hotel and drove me off to see
the diamond. Lucara’s Botswana offices are located behind a steel fence
in a lush cantonment of gardens and low-rise buildings called the
Diamond Technology Park. Steve Lincoln, the head of sales, has a tuft of
gray hair gelled into a spike, bright blue eyes, and arrowhead eyebrows
that give his face an expression of continual surmise. He displays the
glossy, light-brown finish that comes of being a white person living in
a desert country with decent sunblock and a swimming pool. The diamond
trade abounds in people with Lincoln’s background, Englishmen who were
trained from youth in the greatest diamond entrepôt that ever existed:
the Diamond Trading Company, in London. The D.T.C., as it was always
called, was the selling arm of the De Beers mining group. For decades it
was the world’s diamond funnel, trading more than 80 percent of the
world’s rough diamonds. More than half a million carats a week came
sluicing into the D.T.C.’s headquarters on Charterhouse Street, where
young men like Lincoln fed them into sorting machines.

He learned to create the variety that the D.T.C. presented to its
clients. Sorting rough into “boxes” for clients is one of the diamond
game’s dark arts. A mining company wants to sell all the diamonds it
digs up, yet each client will have his own diamond needs, often very
specialized. The right assortment, with concentrations of certain
weights and colors, will persuade the client to accept what he does not
want in order to get what he does. But Lucara has an additional selling
challenge: super-large diamonds. It mines more of them than any other
company. They are too particular to fit into the usual assortments.
Lucara sells them by sealed tender, each diamond its own separate lot.
Dealers hate this system.

“You invariably pay too much,” said Stuart Samuels, a New York big-gem
trader. “Let’s say you’ve already got a customer for it. You don’t want
to lose the stone. So you bid high just to make sure. It’s a system
that’s stacked in favor of the seller. We would much prefer the
tradional way that diamonds have been bought and sold. You sit down with
the seller and make an offer across the table. Then we see how it goes.
Then we have a discussion. There’s some give-and-take.”

Maybe there’s some screaming and some pounding on the table. Hey, it’s
the diamond trade. If you ever find yourself in post-production needing
the sound of screaming males, take your tape recorder to Antwerp and go
to the diamond quarter.

THE SELLER
William Lamb, C.E.O. of Lucara Diamond Corp., at the company’s headquarters, in Vancouver.

By Rob Kruyt.

“It’s a Graff Stone”

This time, though, with a diamond so massive, Lucara too had a problem
with the sealed-tender system. That system involved the usual group of
diamond dealers. It did not reach outside the normal pool of wealth
available for buying diamonds. Lucara had the biggest diamond in the
world. Possibly no asset on earth was worth so much by weight.

“Everybody wants to see it,” Lincoln told me. “I get four calls a
day.”

“From whom?”

“From everybody.”

“From people like Graff?” I said. “I mean, it’s a Graff stone.”

“Yes,” said Lincoln, “people like that.”

But there is really no such thing as “people like Graff.” There is
only Graff, Laurence Graff, the storied London dealer in the kinds of
diamonds bought by people who own countries.

Lincoln showed me into one of the rooms where customers examine rough,
and went to get the diamond. The room had the usual appointments:
high-wattage fluorescent flex lamps, large pads of snowy-white paper,
loupes, tweezers, diamond scoops, and small, cube-shaped machines, the
size of a ring box, that can grade a diamond’s color in an instant.
Dealers like to spread a parcel of diamonds onto white paper and examine
the goods in strong light, often stone by stone, covering the paper with
cryptic notes and calculations.

DIAMOND PRICING IS AN ARCANE, RAPACIOUS ART. THE PER-CARAT PRICE OF
DIAMONDS RISES EXPONENTIALLY WITH SIZE.

Lincoln returned with a sort of heavy-duty Ziploc bag and told me to
close my eyes. He dropped the diamond into my cupped hands. I felt the
sudden, jagged, ice-cold weight, and opened my eyes to see light
storming in my fingers. And—now it seems strange to say it—the
diamond felt fragile too. I suddenly remembered all the stories about
diamonds shattering at a tap. “Look in here,” Lincoln said, indicating
a flat-sided cleft, as if someone had cut a tidy ledge into the rough
surface. It was a cleavage plane, where a piece of the diamond had
broken off. I put the loupe to this natural window and peered in, and in
a moment understood Lucara’s excitement. It felt like toppling over the
edge of a chasm into a clear abyss—a depth of lucid space that seemed
to occupy at least a third of the stone, maybe even half. Easily more
than 400 carats, or that’s what I guessed. I had never seen a diamond
like it that was not locked up in the Tower of London, among the crown
jewels. Lincoln recalled telephoning William Lamb after the stone’s
discovery: “My voice started to break. I had to put down the phone and
take a breath.” He shook his head and made a helpless gesture with his
hands.

That night I sat on the hotel roof and ordered dinner while a soft
breeze blew in from the desert. I thought about the problem of pricing
the big diamond. There is a lot of action in the high-end diamond trade.
Last November, only days before the discovery of the Lesedi diamond,
Joseph Lau, a Hong Kong real-estate tycoon, paid $48.5 million at
Sotheby’s in Geneva for the Blue Moon, a 12.03-carat sapphire-blue
diamond—at $4.03 million a carat, the highest per-carat price ever
paid. The night before, Lau had paid $28.5 million at Christie’s for a
16-carat pink. In two days he had spent $77 million buying two
diamonds. Lau paid a lot of money, but would he—would anyone—pay
even more for the Lucara diamond? And what, in fact, would the purchaser
be buying? Sure, it was the biggest diamond in more than a hundred
years, but for how long might that be said? Lucara was getting very good
at finding super-big gems. It was better at it than any other mining
company in the world.

“No No No Yes!”

In the morning I flew to Francistown and set out across the northern
Kalahari Desert to Lucara’s distant mine. Most diamonds, from Siberia to
Botswana to the Canadian Arctic, are recovered from ore in plants called
diamond mills, which are all basically alike. They pound and smash up
rock, sending the broken pieces racketing through a tangle of chutes and
cyclones until they are reduced to a stream of heavy minerals. Only very
dense minerals, such as diamonds, make it to the final conveyor and head
for a bank of X-rays.

Certain impurities cause diamonds to fluoresce under X-ray. When a
photomultiplier detects a burst of fluorescence, it alerts a group of
air jets that a diamond is coming. As the mineral grains fall off the
end of the conveyor, the air jets blast the diamond from the stream.
Ninety-five percent of the diamonds are captured on the first pass.

At the Lucara mine there is a special problem—a lot of very large
diamonds. Large diamonds must be retrieved from among much larger chunks
of ore, but large chunks of ore would choke an ordinary diamond mill.
Instead, a screening system sends the bigger chunks to a different
recovery circuit altogether. Known as XRT—X-ray transmission—the
system beams a powerful X-ray at the stream of passing rock. As William
Lamb explained, “All it wants to know is whether any of the stuff it’s
looking at is carbon, and it’s saying no no no no no no yes!” At yes!
the XRT alerts a bank of air jets mounted at the end of the conveyor,
and the diamond gets blasted from the stream.

One day I climbed to the top of the recovery plant. The air shook with
the roar of crushed rock pouring into five bright-red XRT machines. Only
one was calibrated to look for diamonds as large as 1,100 carats. From
the day the company turned it on, that one machine did not say yes! to a
single rock for five unbroken months. Then one November night it spotted
the Lesedi La Rona hurtling through its X-ray beam and—FFFT!—sent it
tumbling down a chute to the recovery room, where flabbergasted sorters
found it in the morning.

Like a Picasso

Botswana’s annual diamond output of 25 million carats is sold in
Gaborone at sales called sights that are held 10 times a year. Russia’s
mighty diamond monopoly, Alrosa, operates a similar schedule of sales to
unload its own stupefying volumes—last year, almost 40 million carats.
The idea that diamonds are rare must contend with this evidence that
they are not. Right now, the industry is choked with unsold rough. A
recent contraction of demand in China trashed the wholesale diamond
price and wiped out a number of cutting-and-polishing factories in
India. A sense of apprehension pervades the diamond world. But not at
Lucara.

Lucara has no debt. In July it had so much cash on hand that it declared
a special dividend of $133 million. It has an enviable share of the
world’s heavyweight diamonds. Of the 52 biggest diamonds discovered in
the past three centuries, 10 have come from Lucara in the past three
years. With modifications under way at the mill, Lucara will soon be
able to recover diamonds up to 3,000 carats, and next year, up to 5,000
carats—as big as a softball. Driving all this is Lamb. In November of
last year, when that big diamond rattled down a chute and into his
recovery room, Lamb began thinking about the best way to sell it. As
noted, the usual selling route lay through the middlemen of the diamond
trade. Lamb wanted to see if he could find a more direct line to the
money he thought might be available. This put him on a collision course
with the world’s top diamantaires, because, let’s face it, the pockets
Lamb meant to pick were theirs.

The contest became one of competing narratives. In the narrative
preferred by diamantaires, diamonds possess a mystique conferred by
those who transform rough into polished jewels. In this view, the value
of the rough is a function of the polished outcome it delivers, and only
the diamantaire can say what that should be. Lamb was trying out a
different narrative. In his telling, an uncut diamond, especially one so
magnificent, had an allure all its own. It was unique, like a great
painting, and should be thought of as one would think of a Picasso.
What’s more, he intended to sell it the way a Picasso would be sold—at
auction.

The Biggest Prize

The diamond, newly named Lesedi La Rona—“Our Light” in Botswana’s
majority Tswana language—set out in April on a viewing tour for
prospective buyers that began in Singapore, moved on to Hong Kong and
Dubai, and arrived in New York on a rainy Wednesday night in early May
at Sotheby’s on the Upper East Side. As the champagne and canapés went
around on the sixth floor, attention focused on a shiny black square
column that gleamed in the center of the space.

David Bennett, a curly-haired British auctioneer, stepped to the front
of the throng. Bennett lives in Geneva, but many of the guests clearly
knew him; he has been selling gems at Sotheby’s for 40 years. “I have
never seen anything like this,” he told the room; “no rough gemstone
like it has ever been sold at auction.” He compared it to the Cullinan
diamond, the largest diamond ever found, and inevitably to the crown
jewels: the British monarch’s scepter holds the largest polished white
diamond in the world, the 530-carat Great Star of Africa, which was cut
from the Cullinan. Then a mechanism clicked, and the Lesedi rose up from
inside the column. For a moment it sat there in the twilight, a silvery
outline, until—plink!—a tiny light switched on. The diamond erupted
in a blaze of ice-cold fire.

While Bennett was out front ticking off important selling boxes—Queen:
check; Great Star of Africa: check—a sheaf of confidential documents
was circulating to top dealers. The buyer of a Picasso wants to make
sure he’s not being had. These documents made the case for the Lesedi’s
underlying value. I had copies of the documents. One was a 30-page
analysis by Donald Palmieri, the principal of Gem Certification &
Assurance Lab, a well-known firm in the heart of New York’s Diamond
District.

For decades Palmieri has provided opinions, often in court, to those
struggling to untangle the coils of some diamond scam. He has written
detailed reports on many valuable diamonds. In March of this year
Palmieri and two of his associates flew to Gaborone with their equipment
to examine the Lesedi. The report he wrote was more than technical. It
breathed with wonder. He called the trip to see the diamond a
“life-altering experience” and said that although he had seen “many
thousands of important and magnificent gems and jewels” in his career,
the Lesedi topped them all. One morning I sat in a tiny office with
Palmieri and the diamond experts who’d gone to Botswana with him.

“When I saw it I thought—Oh! It’s so clean!” Halina Kaban said.

“Look how deep it is!” said Sharrie Woodring Hand. We were gazing at a
video she’d made in Gaborone. “That’s 66 millimeters [2.6 inches]
of solid diamond, and you can see right through it!”

“You could read a newspaper through it,” Palmieri said.

“I hope they never cut it,” Kaban said fiercely.

Nevertheless, part of Palmieri’s job was to anticipate that they would
do just that, and to say what a cutter might produce from the diamond.
The conjectured polished outcome would help to calculate the diamond’s
value, even if the buyer kept it as a rough. Or would it? What if the
polished diamond that Palmieri saw inside the stone was bigger than
anything that had ever passed through the hands of a diamond dealer?
Because, guess what? It was. Palmieri wrote that the Lesedi could
“yield the largest D color faceted and polished diamond known in the
world of over 530 carats.” To those reading his words, “over 530
carats” could have only one meaning: a top-color white bigger than the
Great Star of Africa, the greatest prize in diamonds.

Judgment Day

Britain was having a bad moment when I flew over for the auction. The
kingdom had fractured into warring factions in a referendum over
membership in the European Union, and the result of the vote—to ditch
Europe, the option known as Brexit—had sent the pound tumbling and
roiled financial markets around the world. But at Sotheby’s in London’s
Bond Street two nights before the sale, you would never have known it.

A well-dressed mob trooped up the wide, carpeted stairs toward the sound
of band music. Posters of the diamond glowed from the walls. On the
landing stood a line of ramrod-straight young men holding silver trays.
They offered flutes of champagne and a kind of cocktail made of magenta
slush. At the entrance to the suite of galleries hung an enormous
gold-and-orange Keith Haring painting called The Last Rainforest. On
other walls—Warhol, Klein, Twombly, Calder, Dubuffet. It was hard to
miss the message: the jewel deserved to be included in this company.

If I had any glimpse of the train that was headed down the track in
William Lamb’s direction, it came from Laurence Graff. We’d had several
short chats on the phone in the run-up to the auction, and I knew he
strongly opposed it. Graff is not just a member of the high-end trade:
he is its avatar. His establishment in New Bond Street stands beside the
other jewelers like a wolfhound among beagles. I’m sure he would say so
himself. When Lucara sold to a different buyer an 813-carat diamond that
Graff had tried to buy, he told me that he was “surprised that it went
to an outfit that is not . . .,” and here he struggled for the term,
until he found it: “an outfit that is not Graff.”

He was in France when I called him on the morning of the sale, June 29.

LAMB WAS ON A COLLISION COURSE WITH THE WORLD’S TOP DIAMANTAIRES,
BECAUSE THE POCKETS HE MEANT TO PICK WERE THEIRS.

“It’s not nice,” he said. “We don’t like it, what they’re doing. It’s
just not how it’s done. We don’t want to have to expose ourselves in
public [at an auction]. To contend in the open arena, we find it
undesirable.”

Let me be plain about why I found these remarks so chilling, and why, as
I heard them, I feared for Lamb. The high-end diamond game is played on
a very small field by only a few players. Not many diamantaires have the
financial muscle or the nerve to cut big diamonds. If they did not want
to “contend in the open arena,” where would they contend? Well, they
would contend in the shadows. Even before I had set out to see the
diamond—when not a soul outside Lucara had yet seen it—I had heard
dealers put it down. It was no secret that the diamond trade was
trash-talking the Lesedi. I had heard the talk myself—the street was
awash in poisonous gossip. I had always thought that the diamond itself
would silence such talk, issuing into the world armed in its own
magnificence. But in speaking with Graff, I now understood the enormity
of the peril faced by Lamb and his jewel. For it did not matter what
most people thought. It only mattered what these people thought, what
Graff thought, and the few other diamantaires able to buy such a
diamond. Even a collector not planning to cut it—some oligarch or
sheikh—would want to know first how such men judged it: what they saw
inside the stone. Lamb did not have these people at his mercy; at the
auction, they had him at theirs.

“When we polish these big stones, we never know what we are going to
get,” Graff said. “The larger the rough, the greater the chance that
there’s a defect. It can ruin your hopes by as much as 40 percent. You
think you are getting flawless and then find that it’s
VVS1”—referring to a technical grade just shy of perfection. “There
goes 40 percent. We are not even a hundred percent sure of the color.”
I don’t know who else Graff shared his thoughts with, or if he shared
them at all, but I thought of them that night when the hammer came down
and the room sat silent for a moment, stunned.

“I think they had a big buyer,” a veteran diamond-watcher told me. “I
heard about people who were really ready to pay. But it’s an auction.
They have to take their lead from someone, and non-trade buyers would
follow the trade. But the trade was totally opposed.”

Value

Lamb’s eyes were a little bloodshot when we met at his hotel for
breakfast two days after the auction. Still, he looked composed, in
jeans and a long-sleeved T-shirt, with a silver can of energy drink in
front of him. Lamb relishes a challenge. He has run the Grand Canyon rim
to rim. His idea of a European vacation is to ride his bike up the Col
du Glandon. He had decided that the auction was a temporary setback and
dismissed the trash talk with contempt.

“They knew the color was D,” he said. “That was just total bullshit.
If it wasn’t a D, how did it get to $61 million? With the buyer’s
premium, that means someone in the room was ready to pay $68.3 million.
Who’s paying that if he’s not sure it’s a D?”

THE SKEPTIC
Laurence Graff, the London jeweler, in his Mayfair office.

By Daniel Lynch/Eyevine/Redux.

Less than a month later, Lamb would have an offer for the Lesedi La Rona
well above the failed auction price. Importantly, the hopeful buyer was
not a diamantaire. The most beautiful rough diamonds in the world
swagger through Lucara’s catalogues. I would not be resting easy if I
were a diamond dealer who had made Lamb my enemy.

Lamb’s wife, Paula, joined us. His mood brightened. They are very close,
and for them, the Lesedi had become like a personal friend. I’d felt
something of this attachment, too; the stone is deeply moving. Paula
Lamb is protective of her husband, and I could tell that she felt the
outcome of the auction keenly. The tables around us were heaped with
smoked salmon, fruit, the inevitable quinoa. There were berries I could
not identify. Paula Lamb stared at the menu. It listed many lavish kinds
of eggs; she surveyed them bleakly. “I don’t think I even want eggs,”
she said.

Lamb gave her a sudden, radiant smile and leaned across the table and
rubbed her back. Extracting value was still in his thoughts.

“Yes you do, darling,” he said. “You are having eggs. They charge £32
for breakfast here.”